Bank of America 2007 Annual Report Download - page 86
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The allowance for loan and lease losses as a percentage of total
loans and leases outstanding was 1.33 percent at December 31, 2007,
compared to 1.28 percent at December 31, 2006. The increase in the
ratio was driven by reserve increases for higher inherent losses in the
small business and home equity portfolios within GCSBB, reflecting growth
of these businesses and deterioration in the portfolios, and seasoning of
the Card Services unsecured lending portfolio as well as discontinuing
sales of new receivables into the unsecured lending trust. These
increases were partially offset by growth in the residential mortgage portfo-
lio, which has a low loss profile, as the Corporation increased retention of
residential mortgage loans for ALM purposes. Also offsetting the increases
were reserve reductions related to the addition of higher loss profile
accounts to the domestic credit card securitization trust and the sales of
our Latin American portfolios and operations.
Reserve for Unfunded Lending Commitments
In addition to the allowance for loan and lease losses, we also estimate
probable losses related to unfunded lending commitments measured at
historical cost, such as letters of credit and financial guarantees, and
binding unfunded loan commitments. Unfunded lending commitments are
subject to the same assessment as funded loans, except utilization
assumptions are considered. The reserve for unfunded lending commit-
ments is included in accrued expenses and other liabilities on the Con-
solidated Balance Sheet with changes to the reserve generally made
through the provision for credit losses.
The reserve for unfunded lending commitments at December 31,
2007 was $518 million, a $121 million increase from December 31,
2006 primarily driven by the acquisition of LaSalle.
84
Bank of America 2007